(Answered) Question - monty loaned his friend ned 20000 three years

Accounting

Question - Monty loaned his friend Ned $20,000 three years ago. Ned signed a note and made payments on the loan. Last year, when the remaining balance was $11,000, Ned filed for bankruptcy and notified Monty that he would be unable to pay the balance on the loan. Monty treated the $11,000 as a non-business bad debt. Last year Monty had no capital gains and taxable income of $12,000. During the current year, Ned paid Monty $5,000 in satisfaction of the debt. Determine Monty's tax treatment for the $5,000 received in the current year.

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